AMENDED AND RESTATED 80% COINSURANCE AGREEMENT by and between PRIMERICA LIFE INSURANCE COMPANY (the “Ceding Company”) and PECAN RE INC. (the “Reinsurer”) Dated March 31, 2016

 

Exhibit 10.2

EXECUTION VERSION

AMENDED AND RESTATED

80% COINSURANCE AGREEMENT

by and between

PRIMERICA LIFE INSURANCE COMPANY

(the “Ceding Company”)

and

PECAN RE INC.

(the “Reinsurer”)

Dated March 31, 2016

 

 

 

 

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TABLE OF CONTENTS

 

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SCHEDULES

Schedule AIdentification of Reserves

Schedule BNo Conflict or Violation Exceptions

Schedule CStop Loss Assets Amount

EXHIBITS

 

 

 

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AMENDED AND RESTATED 80% COINSURANCE AGREEMENT

This AMENDED AND RESTATED 80% COINSURANCE AGREEMENT (together with the Exhibits hereto, this “Agreement”) is made on this March 31, 2016 (the “Restatement Date”) by and between PRIMERICA LIFE INSURANCE COMPANY, a stock life insurance company domiciled in the Commonwealth of Massachusetts (together with its successors and permitted assigns, the “Ceding Company”) and PECAN RE INC., a special purpose financial insurance company organized under Section 6048f of Title 8 of the Vermont Statutes Annotated (together with its successors and permitted assigns, the “Reinsurer”), and hereby amends and restates in its entirety that certain 80% Coinsurance Agreement, dated as of March 31, 2010, by and between the Ceding Company and Prime Re (as defined below) (the “Original Agreement”).

WHEREAS, the Ceding Company is engaged in the business of issuing certain life insurance policies and certain related riders;

WHEREAS, the Ceding Company and Prime Reinsurance Company, Inc., a special purpose financial insurance company organized under Section 6048f of Title 8 of the Vermont Statutes Annotated (“Prime Re”), have entered into the Original Agreement, pursuant to which the Ceding Company has ceded and Prime Re has reinsured, on an indemnity reinsurance basis certain liabilities with respect to the Reinsured Policies (as defined herein);

WHEREAS, the Ceding Company transferred certain assets to the Reinsurance Trust Accounts on behalf of Prime Re as initial consideration for the reinsurance provided hereunder;

WHEREAS, Prime Re has assigned and transferred, by novation, the Original Agreement to the Reinsurer with the effect that the Reinsurer has succeeded to all rights, obligations, duties and liabilities of Prime Re under the Original Agreement, whenever arising, and the Reinsurer has accepted such assignment, transfer and novation (the “Novation”) pursuant to a Novation Agreement between the Ceding Company, the Reinsurer and Prime Re (the “Novation Agreement”); and

WHEREAS, in connection with the Novation, the Ceding Company and the Reinsurer have agreed to amend and restate the Original Agreement in the form of this Agreement.

NOW THEREFORE, in consideration of the mutual and several promises and undertakings herein contained, and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Ceding Company and the Reinsurer (individually, a “Party” and collectively, the “Parties”), hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1Definitions. The following terms, when used in this Agreement, shall have the meanings set forth in this Article I.

(a)“Administrative Practices” shall have the meaning specified in Section 17.2(a).

(b)“Affiliate” means, with respect to a Party, any entity that controls, is controlled by or is under common control with such Party.

(c)“Agreement” shall have the meaning specified in the Preamble.

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(d)“Applicable Law” means any domestic or foreign, federal, state or local statute, law, ordinance or code, or any written rules, regulations or administrative interpretations issued by any Governmental Authority pursuant to any of the foregoing, in each case applicable to any Party, and any order, writ, injunction, directive, judgment or decree of a court of competent jurisdiction applicable to the Parties.

(e)“Approval Period” means forty-five (45) calendar days, and any forty-five (45) day extension thereof as consented to by the Ceding Company, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, the Ceding Company shall not be required to consent to extend the Approval Period beyond an additional forty-five (45) days, for a total of ninety (90) days.

(f)“Business Day” means any day other than a day on which banks in Zurich, Switzerland, the State of Vermont, the State of Missouri or the Commonwealth of Massachusetts are permitted or required to be closed.

(g)“Capital Maintenance Agreement” means the Capital Maintenance Agreement, dated as of March 31, 2016, by and between Swiss Reinsurance Company Ltd and the Reinsurer.

(h)“Capital Maintenance Failure” shall have the meaning specified in Section 11.1(e).

(i)“Ceding Company” shall have the meaning specified in the Preamble.

(j)“Change of Control” shall have the meaning specified in Section 21.11.

(k)“Claims” means any and all claims, requests, demands or notices made under a Reinsured Policy for payment of benefits or other obligations, including death benefits, waived premiums, returned premium or any other payments alleged to be due in accordance with the terms and conditions of such Reinsured Policy.

(l)“Code” shall have the meaning specified in Section 5.3.

(m)“Collateralized Stop Loss Reinsurance Agreement” means the Collateralized Stop Loss Reinsurance Agreement, dated as of March 31, 2016, by and between Prime Re and the Reinsurer.

(n)“Commissioner” means the Commissioner of Insurance of the State of Vermont.

(o)“Commissions” means the contractual amounts earned by and the bonuses paid to the Ceding Company's sales representatives in connection with the Reinsured Policies on and after the Effective Date.

(p)“Commutation Payment” shall have the meaning specified in Section 11.5.

(q)“Confidential Information” shall have the meaning specified in Section 21.11.

(r)“Conversion” means the issuance by the Ceding Company of a new Coverage in replacement of a Coverage under a Reinsured Policy pursuant to an option granted under the terms of such Reinsured Policy; provided, however, in no event shall Conversions include any Renewal.

(s)“Coverage” means, with respect to any Policy, one or more life insurance coverages issued by the Ceding Company.  A single Policy may have multiple Coverages issued to multiple individuals and such multiple Coverages, in turn, may have different Original Initial Level Premium Periods, all within a single Policy.

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(t)“Covered Liabilities” means all liabilities incurred by the Ceding Company under the express terms of the Reinsured Policies (including End of Term Renewals) and all Reinsured ECOs; provided, however, in no event shall Covered Liabilities include any Excluded Liabilities.

(u)“DAC Tax Election” shall have the meaning specified in Section 5.3.

(v)“Direct Premiums” means all premiums actually received from the Policyholders attributable to the Reinsured Policies from and after the Effective Date and waived premiums on such Policies.

(w)“Effective Date” means January 1, 2010.

(x)“Eligible Assets” means cash in United States dollars, certificates of deposit issued by a United States bank and payable in United States dollars, and investments permitted by M.G.L. c. 175 or any combination of the above, provided investments in or issued by an entity controlling, controlled by or under common control with either the Ceding Company or the Reinsurer shall not exceed 5% of total investments.  Commercial paper and other obligations of institutions must be issued by a corporation (other than the Ceding Company, Prime Re or the Reinsurer, or any Affiliate of any of them) which is organized and existing under the laws of the United States of America, unless otherwise allowed by M.G.L. c. 175.  The Eligible Assets are further subject to and limited by, the investment guidelines set forth in the Reinsurance Trust Agreement.

(y)“End of Term Conversion” means, with respect to a Coverage under a Reinsured Policy, a Conversion that occurs (i) at any time during the two year period ending on the last day of the Original Initial Level Premium Period of a Coverage or (ii) after the last day of such period.

(z)“End of Term Renewal” means with respect to any Coverage, a Renewal thereof that occurs at the end of the Original Initial Level Premium Period in respect of such Coverage.

(aa)“Excess of Loss Reinsurance Agreement” means the Excess of Loss Reinsurance Agreement, dated as of March 31, 2016, by and between Prime Re and the Reinsurer.

(bb)“Excess Withdrawal Amount” shall have the meaning specified in Section 15.6.

(cc)“Excluded Liabilities” shall have the meaning specified in Section 2.2.

(dd)“Existing Practice” shall have the meaning specified in Section 17.2(a).

(ee)“Expense Allowance” means an annualized per base policy expense allowance equal to the Reinsurer's Quota Share multiplied by $42.50 for each Reinsured Policy payable on a monthly basis, which amount shall be increased (i) by 3% on the first anniversary date of the Effective Date and (ii) thereafter, by a compounded rate equal to the percentage increase, if any, in the employment cost index published by the United States Bureau of Labor Statistics at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇ on each subsequent anniversary date of the Effective Date.

(ff)“Extra-Contractual Obligations” means all liabilities, obligations and expenses not arising under the express terms and conditions of any Reinsured Policy, whether such liabilities, obligations or expenses are owing to an insured, a Governmental Authority or any other Person in connection with such Reinsured Policy, including (a) any liability for punitive, exemplary, consequential, special, treble, tort, bad faith or any other form of extra-contractual damages, (b) damages or claims in excess of the applicable policy limits of the Reinsured Policies, (c) statutory or regulatory damages, fines, penalties, forfeitures and similar charges of a penal or disciplinary nature, and (d) liabilities and obligations arising out of any act, error or omission, whether or not intentional, in bad faith or otherwise, including any act, error or omission relating to (i) the form, marketing, production, issuance, sale, cancellation or administration of Reinsured Policies or (ii) the failure to pay or the delay in payment of claims, benefits, disbursements or any other amounts due or alleged to be due under or in connection with Reinsured Policies (exclusive of interest on payments to Policyholders, as determined in accordance with the

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laws of the jurisdiction applicable to such Reinsured Policy).  For avoidance of doubt, any liabilities, obligations and expenses relating to any change in the Reinsured Policies arising out of or resulting from litigation, arbitration or settlements will be deemed Extra-Contractual Obligations.

(gg)“Fair Value” shall have the meaning specified in the Reinsurance Trust Agreement.

(hh)“Governmental Authority” means any federal, state, county, local, foreign or other governmental or public agency, instrumentality, commission, authority or self-regulatory organization, board or body.

(ii)“Indemnification Claims” shall have the meaning specified in Section 18.1.

(jj)“Initial Ceding Commission” shall have the meaning specified in the Original Agreement.

(kk)“Insurance Division” means the Massachusetts Division of Insurance.

(ll)“Interest Maintenance Reserves” means the reserves required to be established under SAP as liabilities on a life insurer's statutory financial statements applicable to all types of fixed income investments.

(mm)“Massachusetts SAP” means the statutory accounting and actuarial principles and practices prescribed or permitted by the Insurance Division for Massachusetts domestic life insurance companies.

(nn)“Milliman” shall have the meaning specified in Section 17.1(e).

(oo)“Milliman Information” shall have the meaning specified in Section 17.1(e).

(pp)“Milliman Report” means the report attached hereto as Exhibit VI.

(qq)“Monthly Account Balance Report” shall have the meaning specified in Section 8.2.

(rr)“Monthly Report” shall have the meaning specified in Section 8.1.

(ss)“Net Premium” shall have the meaning specified in Section 4.1.

(tt)“Novation” shall have the meaning specified in the Recitals.

(uu)“Novation Agreement” shall have the meaning specified in the Recitals.

(vv)“Original Agreement” shall have the meaning specified in the Preamble.

(ww)“Original Initial Level Premium Period” means, with respect to each Reinsured Policy, the period beginning with the original issue date of a Coverage and ending with the first premium increase date identified within such Reinsured Policy on which premiums for such Coverage will increase without a corresponding increase in the terms or limits of such Coverage.

(xx)“Parties” shall have the meaning specified in the Recitals.

(yy)“Pecan-Funded Reserves Trust Account” shall have the meaning specified in Section 15.1.

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(zz)“Pecan-Funded Reserves Trust Account Required Balance” means, as of any date, the amount equal to the difference between (i) Reinsurer's Quota Share of the Statutory Reserves with respect to the Reinsured Policies and (ii) the Stop Loss Assets Amount.

(aaa)“Pecan-Funded Security Balance” means, as of the last day of each calendar quarter, the aggregate Fair Value as of such date of the Eligible Assets maintained in the Pecan-Funded Reserves Trust Account.

(bbb)“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

(ccc)“Policies” means term life insurance base policies and riders thereto issued by the Ceding Company.

(ddd)“Policyholders” means the owners or holders of one or more of the Reinsured Policies.

(eee)“Premium Taxes” means any taxes imposed on premiums relating to the Reinsured Policies.

(fff)“Prime-Funded Reserves Trust Account” shall have the meaning specified in Section 15.1.

(ggg)“Prime-Funded Reserves Trust Account Required Balance” means, as of any date, the amount equal to the Stop Loss Assets Amount.

(hhh)“Prime-Funded Security Balance” means, as of the last day of each calendar quarter, the aggregate Fair Value as of such date of the Eligible Assets maintained in the Prime-Funded Reserves Trust Account.

(iii)“Prime Rate” means, as of any day, a fluctuating interest rate per annum equal to the average (rounded upward to the nearest 1/16 of 1%) of the “prime” rate of interest announced publicly by Bank of America, N.T. & S.A., The Chase Manhattan Bank, N.A., Citibank N.A. and ▇▇▇▇▇▇ Guaranty Trust Company of New York.  If any of these banks does not publicly announce a prime rate, the Ceding Company and the Reinsurer (or its designee) shall jointly select another bank that publicly announces a prime rate and the prime rate publicly announced by that bank shall be used.

(jjj)“Prime Re” shall have the meaning specified in the Recitals.

(kkk)“Primerica” means Primerica, Inc., a Delaware corporation.

(lll)“Recapture Fee” shall have the meaning specified in Section 11.3.

(mmm)“Recapture Notice” shall have the meaning specified in Section 11.2.

(nnn)“Reinstatement” shall have the meaning specified in Section 7.1.

(ooo)“Reinsurance Credit Notice” shall have the meaning specified in Section 11.1(b).

(ppp)“Reinsurance Trust Accounts” shall have the meaning specified in Section 15.1.

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(qqq)“Reinsurance Trust Agreement” means the Amended and Restated 80% Coinsurance Trust Agreement, dated as of March 31, 2016, by and among the Ceding Company, the Reinsurer and The Bank of New York Mellon, as amended, supplemented, novated or otherwise modified from time to time, and at any time.

(rrr)“Reinsured ECOs” means (i) Extra-Contractual Obligations paid by the Ceding Company to a single (or joint) policyholder or beneficiary in the ordinary course of business, consistent with prudent business practices and (ii) Extra-Contractual Obligations arising in circumstances where the Reinsurer is an active party and directs or consents to the act, omission or course of conduct occurring after the date hereof that resulted in such Extra-Contractual Obligation; provided, however, that Reinsured ECOs shall not include any liabilities: (x) relating to class actions of any kind; (y) relating to sales, marketing or distribution practices of the Ceding Company or its sales representatives directed or applied to any specific class of policyholders as indicated on the underwriting records of the Ceding Company; or (z) relating to or based on violations of, or noncompliance with, Applicable Law by the Ceding Company.  Notwithstanding the foregoing, the term “Reinsured ECOs” shall not include any punitive, exemplary, consequential, special, treble, tort, bad faith or any other form of extra-contractual damages to the extent not permitted to be insured or reinsured under applicable law.

(sss)“Reinsured Policies” means Policies issued (i) on the policy forms identified in Exhibit I and riders thereto in force as of 11:59 p.m. (EST) on December 18, 2009 and (ii) as a result of any Conversions thereto, but not including any End of Term Conversions arising from Coverages with an Original Initial Level Premium Period ending on or after January 1, 2017.

(ttt)“Reinsurer” shall have the meaning specified in the Preamble.

(uuu)“Reinsurer's Quota Share” means eighty percent (80%) or such other percentage as modified to reflect a partial recapture of the Reinsurer's Quota Share of the Reinsured Policies pursuant to the terms and conditions specified in Section 2.1 and Article XI.

(vvv)“Renewal” means the continuation of Coverage under a Reinsured Policy after the end of the Original Initial Level Premium Period of such Coverage in accordance with the terms of such Reinsured Policy.

(www)“Renewal Recapture Right” shall have the meaning specified in Section 11.4.

(xxx)“Representatives” shall have the meaning specified in Section 12.1.

(yyy)“Required Balance” means, as of any date, the amount equal to the Reinsurer's Quota Share of the Statutory Reserves with respect to the Reinsured Policies.

(zzz)“Restatement Date” shall have the meaning specified in the Preamble.

(aaaa)“Retained Asset Account” means the Primerica Estate Account identified in the financial statements of the Ceding Company, reflecting death benefit proceeds retained by the Ceding Company on behalf of beneficiaries and available to such beneficiaries on demand.

(bbbb)“SAP” means statutory accounting principles.

(cccc)“Security Balance” means, as of the last day of each calendar quarter following the date hereof, the aggregate Fair Value as of such date of the Eligible Assets maintained in the Reinsurance Trust Accounts.

(dddd)“Statutory Financial Statement Credit” means credit for reinsurance permitted by the Massachusetts General Laws on the Ceding Company's statutory financial statements filed in the Commonwealth of Massachusetts with respect to the Reinsured Policies.

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(eeee)“Statutory Reserves” means, as of any date, all reserves set forth on Schedule A as of such date corresponding to liabilities of a type or kind identified as Covered Liabilities, related to the Reinsured Policies, such amount as determined by the Ceding Company in accordance with the methodologies used by the Ceding Company to calculate such amounts for purposes of its statutory financial statements prepared in accordance with Massachusetts SAP and generally consistent with past practices as of all dates without giving effect to this Agreement.

(ffff)“Stop Loss Assets Amount” means, in respect of any calendar quarter, the amount set forth in Schedule C.

(gggg)“Then Current Practice” shall have the meaning specified in Section 17.2(a).

(hhhh)“Third Party Accountant” means an independent accounting firm which is mutually acceptable to Ceding Company and Reinsurer, or, if Ceding Company and Reinsurer cannot agree on such an accounting firm, an independent accounting firm mutually acceptable to Ceding Company's and Reinsurer's respective independent accountants.

(iiii)“Third Party Reinsurance” means reinsurance of the Reinsured Policies placed with third party reinsurers as identified and summarized in Exhibit II (as such Exhibit II may be amended from time to time, and at any time).

(jjjj)“Third Party Reinsurance Premiums” means all premiums paid by the Ceding Company on or after the Effective Date for coverage under Third Party Reinsurance, net of refunds of unearned premiums on lapse (except that the refund of unearned premiums shall only apply for premiums payable under Third Party Reinsurance on or after the Effective Date).

(kkkk)“Top-Up Notice” shall have the meaning specified in Section 8.3(b).

(llll)“Trust Assets” shall have the meaning specified in Section 15.2.

(mmmm)“Trustee” means the trustee under the Reinsurance Trust Agreement.

ARTICLE II

REINSURANCE

Section 2.1Reinsurance.  Subject to the terms and conditions of this Agreement, the Ceding Company hereby cedes on an indemnity basis to the Reinsurer, and the Reinsurer hereby accepts and agrees to reinsure on an indemnity basis, the Reinsurer's Quota Share of the Covered Liabilities, provided, however, in the event of a recapture involving a pro rata portion of the Reinsurer's Quota Share of the Reinsured Policies pursuant to Article XI hereof, the Reinsurer's Quota Share of the Covered Liabilities will be proportionately reduced.  The Reinsurer's Quota Share of Covered Liabilities shall be reduced, but not below zero, by the Reinsurer's Quota Share of Third Party Reinsurance for Covered Liabilities in accordance with the respective terms thereof, to the extent such Third Party Reinsurance is actually collected.

Section 2.2Exclusions.  Notwithstanding any provision of this Agreement to the contrary, the Reinsurer shall not be liable for any liabilities or obligations of the Ceding Company that are:

(a)liabilities relating to benefits, including, but not limited to, terminal illness benefits, other than life insurance death benefits, any related waiver of premium coverages and write-offs of terminal illness policy loan balances;

(b)any liabilities resulting from any coverage added after the Effective Date to a Reinsured Policy that is not a Conversion or Renewal or otherwise required or permitted by the terms of such Reinsured Policy in effect on the Effective Date, unless such additional coverage is required by Applicable Law or has been approved in writing in advance by the Reinsurer;

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(c)any liabilities relating to deaths occurring prior to the Effective Date;

(d)Extra-Contractual Obligations, other than Reinsured ECOs;

(e)any loss or liabilities relating to or arising from the Ceding Company's Retained Asset Account for the Reinsured Policies;

(f)any losses or liabilities arising under any End of Term Conversion occurring on or after January 1, 2017;

(g)any loss or liabilities relating to or arising from actions taken by the Ceding Company without the consent of the Reinsurer as required by Section 17.2(b) hereof;

(h)any loss or liabilities relating to or arising from claims made, or lawsuits brought, by agents of the Ceding Company; and

(i)all liabilities or obligations of any kind or nature whatsoever that do not relate to the Reinsured Policies (collectively, (a)-(i) constitute the “Excluded Liabilities”).

Section 2.3Territory.  The reinsurance provided under this Agreement shall apply to the Covered Liabilities covering lives and risks wherever resident or situated.

ARTICLE III

COMMENCEMENT OF THE REINSURER'S LIABILITY

Section 3.1Commencement of the Reinsurer's Liability.  Except as otherwise set forth in this Agreement, the Reinsurer's liability under this Agreement shall attach simultaneously with that of the Ceding Company, and all reinsurance with respect to which the Reinsurer shall be liable by virtue of this Agreement shall be subject in all respects to the same risks, terms, rates, conditions, interpretations, and to the same modifications, alterations, cancellations and receivables under Third Party Reinsurance, as the respective Reinsured Policies to which liability under this Agreement attaches, the true intent of this Agreement being that the Reinsurer shall, in every case to which liability under this Agreement attaches and always subject to the Excluded Liabilities, follow the fortunes of the Ceding Company.

ARTICLE IV

REINSURANCE PREMIUMS, ALLOWANCES AND OTHER OBLIGATIONS

Section 4.1Reinsurance Premiums.  As consideration for the reinsurance provided herein, on a monthly basis during the term of this Agreement, the Ceding Company shall pay to the Reinsurer the Reinsurer's Quota Share of Direct Premiums net of the Reinsurer's Quota Share of Third Party Reinsurance Premiums (the “Net Premium”).  The Net Premium shall be paid in accordance with Article VIII.

Section 4.2Allowances.  At each month end following the date hereof, the Reinsurer shall pay the Ceding Company the Expense Allowance calculated on the basis of the number of Reinsured Policies in force on such date.  The number of Reinsured Policies in force for each calendar month shall be determined by adding the number of Reinsured Policies in force on the last day of the prior calendar month and the number of Reinsured Policies in force on the last day of the current calendar month and dividing that total by two (2); provided, however, if there are any End of Term Renewals, the Expense Allowance for the Reinsured Policies associated with such End of Term Renewals that start after December 31, 2016 will be zero.  The Expense Allowance shall be payable in accordance with Article VIII.

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Section 4.3Other Obligations.  On a monthly basis during the term of this Agreement, the Reinsurer shall pay the Ceding Company the Reinsurer's Quota Share of the following amounts:  (i) 2.3% of premiums collected for such month in connection with the Reinsured Policies as a provision for Premium Taxes incurred by the Ceding Company; (ii) $50 for each new Conversion which results in the issuance of a Reinsured Policy (including the issuance of one or more riders to a base Policy); (iii) Commissions for each Reinsured Policy; and (iv) any out-of-pocket underwriting fees associated with Reinstatements.

Section 4.4Third Party Reinsurance.  The Ceding Company shall pay to the Reinsurer the Reinsurer's Quota Share of all ceding commissions and any Premium Tax or other expense allowances collected by the Ceding Company from the reinsurers under Third Party Reinsurance.

ARTICLE V

TAXES

Section 5.1Guaranty Fund Assessments.  Except as provided in Section 4.2, the Reinsurer shall not reimburse the Ceding Company for any guaranty fund assessments arising on account of premiums on the Reinsured Policies.

Section 5.2Premium Taxes.  The Ceding Company shall be liable for all Premium Taxes.  The Reinsurer shall pay to the Ceding Company a provision for Premium Taxes incurred in connection with premiums received under the Reinsured Policies in accordance with Section 4.3.

Section 5.3DAC Tax Election.

(a)The Ceding Company and the Reinsurer agree to the election pursuant to Treasury Regulations section 1.848-2(g)(8) (such election being referred to as the “DAC Tax Election”), whereby:

(i)the party with the net positive consideration for this Agreement for each taxable year will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of section 848(c)(1) of the Internal Revenue Code of 1986, as amended (the “Code”);

(ii)the parties agree to exchange information pertaining to the amount of net consideration under this Agreement each year to ensure consistency.  If requested, the Ceding Company will provide supporting information reasonably requested by the Reinsurer.  The parties also mutually agree to exchange information otherwise required by the U.S. Internal Revenue Service. (The term “net consideration” will refer to the net consideration as defined in Treasury Regulations section 1.848-2(f)); and

(iii)this DAC Tax Election will be effective for the first taxable year in which this Agreement is effective and for all years for which this Agreement remains in effect.

(b) The Ceding Company and the Reinsurer will each attach a schedule to their respective federal income tax returns filed for the first taxable year for which this DAC Tax Election is effective.  Such schedule shall identify the Agreement as a reinsurance agreement for which the DAC Tax Election under Treasury Regulations section 1.848-2(g)(8) has been made.

(c)Each of the Ceding Company and the Reinsurer represents and warrants that it is subject to U.S. taxation under the provisions of subchapter L of Chapter 1 of the Code.

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ARTICLE VI

CLAIMS

Section 6.1Notice of Claims.  Claim amounts less than or equal to $250,000 (net of amounts recoverable under Third Party Reinsurance) will be reported by the Ceding Company to the Reinsurer on a bordereau basis, and all other Claims shall be reported, with such information as may be reasonably requested by the Reinsurer, on an individual basis, in each case in accordance with Section 8.1.

Section 6.2Settlement Authority.  The Ceding Company shall have full authority to determine liability on any Claim reinsured hereunder and may settle losses as it deems appropriate, but in so doing it shall act with the skill and diligence commonly expected from qualified personnel performing such duties for U.S. life insurance companies and consistent with the Ceding Company's Then Current Practice.

Section 6.3Claim Payments.  Following receipt by the Reinsurer of the Monthly Report setting forth the Ceding Company's payment of any Covered Liabilities reinsured hereunder, the Reinsurer shall make payment of the Reinsurer's Quota Share of the Covered Liabilities in accordance with Article VIII.

Section 6.4Misstatement of Age or Sex.  In the event of an increase or reduction in the amount of the Ceding Company's insurance on any Reinsured Policy because of an overstatement or understatement of age or misstatement of sex, established during the life, or after the death, of the insured, the Reinsurer will share in such increase or reduction in proportion to the Reinsurer's Quota Share.

ARTICLE VII

REINSTATEMENTS

Section 7.1Reinstatements. If a Reinsured Policy is reinstated in accordance with its terms and the Ceding Company's reinstatement rules as in effect on the Effective Date (a “Reinstatement”), the reinsurance of such Reinsured Policy will be restored as if no change had occurred.  In such a case, the Ceding Company shall promptly pay the Reinsurer the Reinsurer's Quota Share of the Net Premiums attributable to such Reinstatement.

ARTICLE VIII

ACCOUNTING AND RESERVES

Section 8.1Monthly Reports.  Within twenty (20) Business Days after the end of each calendar month, the Ceding Company shall deliver to the Reinsurer the following monthly reports (each a “Monthly Report”) substantially in the form set forth in Exhibit III hereto:  (i) Monthly Settlement Report; (ii) Policy Exhibit; (iii) Reserve Report; (iv) Claim Reserve Report; (v) Bordereau Report; and (vi) Non-Bordereau Claims Report.

Section 8.2Monthly Account Balance Reports.  No later than ten (10) Business Days after the end of each calendar month, the Ceding Company shall prepare and deliver to the Reinsurer a report in the form and containing the information set forth in Exhibit IV (each a “Monthly Account Balance Report”).

Section 8.3Settlements.

(a)All monthly settlements shall be effected as follows:  (i) if the Monthly Report shows that the Ceding Company owes the Reinsurer a positive amount, the Ceding Company will pay the amount owed simultaneously with the delivery to the Reinsurer of the Monthly Report and (ii) if the Monthly Report shows that the Reinsurer owes the Ceding Company a positive amount, the Reinsurer shall pay the amount owed within twenty (20) Business Days after receiving the Monthly Report, it being understood that, for purposes of this Section 8.3(a), appropriate adjustments shall be made for withdrawals and reimbursements made during the month by the Ceding Company pursuant to Sections 15.5 and 15.6.

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(b)If the Reserve Report provided to the Reinsurer for the last month of a calendar quarter shows that (i) for so long as there is a separate Prime-Funded Reserves Trust Account and Pecan-Funded Reserves Trust Account contemplated by the Reinsurance Trust Agreement (A) the Pecan-Funded Security Balance is less than the Pecan-Funded Reserves Trust Account Required Balance as of the end of the immediately preceding calendar quarter or (B) the Prime-Funded Security Balance is less than the Prime-Funded Reserves Trust Account Required Balance as of the end of the immediately preceding calendar quarter or (ii) otherwise, the Security Balance is less than the Required Balance as of the end of the immediately preceding calendar quarter, in each case the Ceding Company shall notify the Reinsurer of the amount of the deficiency (the “Top-Up Notice”).  The Top-Up Notice shall be delivered to the Reinsurer at the same time as the copy of the Monthly Report for the same calendar quarter.

(c)All settlements of account between the Ceding Company and the Reinsurer shall be made in cash or its equivalent.

Section 8.4Offset and Recoupment.  Each Party, at its option, may offset or recoup any balance or balances, whether on account of premiums, Expense Allowances, claims and losses, Excess Withdrawal Amounts from the Pecan-Funded Reserves Trust Account and interest accrued thereon or amounts otherwise due from one Party to the other under this Agreement or other agreements between the Parties, or as a result of damages awarded to either Party pursuant to litigation or otherwise, which shall be deemed mutual debts or credits, as the case may be; provided, however, that the Party electing such right with respect to matters not reflected in the Monthly Reports shall notify the other Party in writing of its election to do so.

Section 8.5Currency.  All financial data required to be provided pursuant to the terms of this Agreement shall be expressed in United States dollars.  All payments and all settlements of account between the Parties shall be in United States currency unless otherwise agreed by the Parties.

ARTICLE IX

EXPENSES IN CONNECTION WITH THE REINSURED POLICIES

Section 9.1Expenses in Connection with the Reinsured Policies.  The Ceding Company shall pay for all expenses and charges incurred in connection with the Reinsured Policies including medical examinations, inspection fees, and other fees.  Except as provided in Section 4.2 and Section 4.3, such amounts shall not be reimbursed by the Reinsurer.

ARTICLE X

ERRORS AND OMISSIONS

Section 10.1Errors and Omissions.  Subject to the terms of this Agreement, neither Party hereto shall be prejudiced in any way by inadvertent errors or omissions made by such Party in connection with this Agreement provided such errors and omissions are corrected promptly following discovery thereof.  Upon the discovery of an inadvertent error or omission by either Party hereto, appropriate adjustments shall be made as soon as practicable to restore the Parties to the fullest extent possible to the position they would have been in had no such inadvertent error or omission occurred.

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ARTICLE XI

RECAPTURE

Section 11.1Recapture.  The Ceding Company may in accordance with the provisions of this Article XI recapture, in its sole discretion, all or a pro rata portion of all of the Reinsurer's Quota Share of the Reinsured Policies upon the occurrence of one of the following events:

(a)If the Reinsurer becomes insolvent or if the Commissioner has instituted a proceeding or entered a decree or order for the appointment of a rehabilitator or liquidator;

(b)If the Reinsurer fails to take steps reasonably satisfactory to the Ceding Company to assure the Ceding Company of full Statutory Financial Statement Credit for the Reinsured Policies within forty-five (45) calendar days of Reinsurer's receipt of written notice from the Ceding Company (a “Reinsurance Credit Notice”) that the Ceding Company has been advised by any Governmental Authority that the Governmental Authority will deny or has denied Statutory Financial Statement Credit on any financial statement filed by the Ceding Company with such Governmental Authority;

(c)If the Reinsurer is in material breach of any other representation, warranty or covenant under this Agreement and the Reinsurer fails to cure any such material breach of any representation, warranty or covenant hereunder within sixty (60) calendar days of receipt of written notice of such breach by the Reinsurer, unless such breach constitutes a Capital Maintenance Failure, in which case the provision in Section 11.1(e) shall apply and this provision shall not apply;

(d)If the Reinsurer fails in any material respects to fund, or cause to be funded, either of the Reinsurance Trust Accounts to the amount required after receipt of the Top-Up Notice under Section 15.3(d) within the time period specified therein, and the Reinsurer fails to cure any such funding deficiency within twenty (20) Business Days of receipt of written notice of such funding deficiency by the Reinsurer and the Security Balance is less than the Required Balance; or

(e)If there is a Capital Maintenance Failure under the Capital Maintenance Agreement.  For purposes of this Section 11.1(e), a “Capital Maintenance Failure” occurs at the end of any Approval Period when (i) the Reinsurer's Total Adjusted Capital is less than the Capital Threshold (as such terms are defined in the Capital Maintenance Agreement) and (ii) the Reinsurer fails to obtain a payment from the Obligor (as defined in the Capital Maintenance Agreement) in the amount of the deficiency within the Approval Period beginning on the date a demand is made by or on behalf of the Reinsurer for such payment in accordance with Section 2(a) of the Capital Maintenance Agreement.  The Reinsurer shall reimburse the Ceding Company for actual reasonable expenses incurred by the Ceding Company pursuant to this Section 11.1(e).

Section 11.2Notice of Recapture.  The Ceding Company shall notify the Reinsurer in writing of the reasons for, and the effective date of, the recapture ninety (90) calendar days prior to the effective date of recapture (the “Recapture Notice”); provided, however, that the recapture shall not be deemed to be consummated until the final accounting described in Section 11.4 of this Article XI has been completed and the Reinsurer has paid the Commutation Payment, if any.

Section 11.3Recapture Fee.  The Ceding Company shall pay a recapture fee (the “Recapture Fee”) to the Reinsurer upon the occurrence of any recapture of the Reinsured Policies pursuant to Section 11.1(b) if such recapture was triggered by the inability of the Ceding Company to obtain full Statutory Financial Statement Credit for the Reinsured Policies due to actions taken by the Ceding Company or its Affiliates; provided, however, that if the Reinsurer is in material breach of any representation, warranty or covenant under this Agreement at the time a recapture is triggered under Section 11.1(b), no Recapture Fee will be due and payable by the Ceding Company.  The Recapture Fee shall be equal to an amount to be determined by an actuarial appraisal prepared by a nationally recognized independent actuarial firm in accordance with methodologies agreed upon by the Ceding Company and Reinsurer to determine the value of the Reinsured Policies at such time in a manner consistent with the valuation of the Reinsured Policies as set forth in the Milliman Report and consistent with the determination of the Initial Ceding Commission based on such valuation.

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Section 11.4Renewal Recapture.  The Ceding Company shall also have the right, upon prior written notice to the Reinsurer, to recapture, in its sole discretion, all or a pro rata portion of End of Term Renewals arising from Policies with an Original Initial Level Premium Period ending on or after January 1, 2017 (the “Renewal Recapture Right”).  No Recapture Fee is payable in connection with the recapture of any End of Term Renewal.

Section 11.5Commutation Accounting and Settlement.  In the event of any recapture under this Article XI or termination under Section 21.8, the Reinsurer shall pay to the Ceding Company an amount equal to (i) the Reinsurer's Quota Share of the Statutory Reserves, Interest Maintenance Reserves (but only to the extent the Ceding Company's Interest Maintenance Reserves are increased) and advance premiums, if applicable, attributable to the Reinsured Policies being recaptured, in each case, calculated as of the effective date of the recapture set forth in the Recapture Notice; minus (ii) any amounts due to the Reinsurer but unpaid under this Agreement, including the Recapture Fee, if any, and net deferred premiums; plus (iii) any amounts due to the Ceding Company but unpaid under this Agreement (collectively, the “Commutation Payment”); provided, however, that, if the amount calculated pursuant to clause (ii) of this subsection exceeds the amounts calculated pursuant to clauses (i) and (iii) of this subsection, the Ceding Company shall pay to the Reinsurer the amount of such excess.  Following recapture and payment to the appropriate Party of the net Commutation Payment required hereunder, neither Party shall have further liability to the other Party hereunder with respect to the recaptured business.

Section 11.6Limitation on Partial Recaptures.  Notwithstanding the provisions of Section 11.1, the Ceding Company shall not be permitted to effect a partial recapture pursuant to Section 11.1 if, after giving effect to the recapture, the Statutory Reserves would be less than U.S. $100,000,000.

ARTICLE XII

ACCESS TO BOOKS AND RECORDS

Section 12.1Access to Books and Records.

(a)The Ceding Company shall, upon reasonable notice, provide to the Reinsurer, and the counsel, financial advisors, accountants, actuaries and other representatives of the Reinsurer (the “Representatives”) access, at the Reinsurer's sole cost and expense, to review, inspect, examine and reproduce the Ceding Company's books, records, accounts, policies, practices and procedures, including underwriting policy, claims administration guidelines and sales and Conversion practices, relating to the Reinsured Policies, including any audits and self assessments conducted by the Ceding Company as well as any unaudited information provided to Primerica in connection with Primerica's public company reporting requirements, at the place such records are located, and to discuss such matters with the employees, external auditors and external actuaries of the Ceding Company that are knowledgeable about such records, without undue disruption of the normal operations of the Ceding Company.

(b)The Reinsurer and its Representatives shall have the right, at its sole cost and expense, to conduct audits from time to time, upon reasonable notice to the Ceding Company, of the relevant books, records, accounts, policies, practices and procedures, including underwriting policy, claims administration guidelines and sales and Conversion practices of the Ceding Company relating to the Reinsured Policies.

(c)The Reinsurer shall reimburse the Ceding Company for any reasonable out-of-pocket costs that the Ceding Company incurs in providing assistance to the Reinsurer and its Representatives in connection with this Section 12.1.

(d)The Ceding Company shall use its reasonable best efforts to assist and cooperate with the Reinsurer, and its Representatives in providing access to the relevant in force files, experience data, books, records and accounts of the Ceding Company relating to the Reinsured Policies.

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ARTICLE XIII

INSOLVENCY

Section 13.1Insolvency.  In the event of the insolvency of the Ceding Company, payments due the Ceding Company on all reinsurance made, ceded, renewed or otherwise becoming effective under this Agreement shall be payable by the Reinsurer on the basis of claims filed and allowed in the liquidation proceeding under the Reinsured Policies without diminution because of the insolvency of the Ceding Company, either directly to the Ceding Company or to its domiciliary liquidator or receiver, except where the Reinsurer, with the consent of the Policyholder and in conformity with Applicable Law, has assumed the Ceding Company's obligations as direct obligations of the Reinsurer to the payees under the Reinsured Policies and in substitution for the obligations of the Ceding Company to the payees.  It is understood, however, that in the event of the insolvency of the Ceding Company, the liquidator or receiver or statutory successor of the Ceding Company shall give written notice to the Reinsurer of any impending Claim against the Ceding Company on a Reinsured Policy within a reasonable period of time after such Claim is filed in the insolvency proceedings and that during the pendency of such Claim the Reinsurer may, at its own expense, investigate such Claim and interpose, in the proceeding where such Claim is to be adjudicated any defense or defenses which it may deem available to the Ceding Company or its liquidator or receiver or statutory successor.  It is further understood that the expense thus incurred by the Reinsurer shall be chargeable, subject to court approval, against the Ceding Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Ceding Company solely as a result of the defense undertaken by the Reinsurer.

ARTICLE XIV

DISPUTE RESOLUTION

Section 14.1Consent to Jurisdiction.  Each of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of the United States District Court for the District of Massachusetts or, if such court does not have jurisdiction, the appropriate district court of the Commonwealth of Massachusetts, for the purposes of enforcing this Agreement.  The parties shall take such actions as are within their control to cause any disputes as described in the preceding sentence to be assigned to the complex litigation docket of the applicable court.  In any action, suit or other proceeding, each of the parties hereto irrevocably and unconditionally waives and agrees not to assert by way of motion, as a defense or otherwise any claims that it is not subject to the jurisdiction of the above courts, that such action or suit is brought in an inconvenient forum or that the venue of such action, suit or other proceeding is improper.  Each of the parties hereto also agrees that any final and unappealable judgment against a party hereto in connection with any action, suit or other proceeding as contemplated in this Article XIV shall be conclusive and binding on such party and that such award or judgment may be enforced in any court of competent jurisdiction, either within or outside of the United States.  A certified or exemplified copy of such award or judgment shall be conclusive evidence of the fact and amount of such award or judgment.

Section 14.2Waiver of Jury Trial.  Each of the parties hereto irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the transactions contemplated hereby.

Section 14.3Specific Performance.  The parties recognize and agree that if for any reason any of the provisions of this Agreement are not performed in accordance with their specific terms or are otherwise breached, immediate and irreparable harm or injury would be caused for which money damages would not be an adequate remedy.  Accordingly, each party agrees that, in addition to any other available remedies each other party shall be entitled to an injunction restraining any violation or threatened violation of any of the provisions of this Agreement without the necessity of posting a bond or other form of security.  In the event that any action should be brought in equity to enforce any of the provisions of this Agreement, no party will allege, and each party hereby waives the defense, that there is an adequate remedy at law.

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ARTICLE XV

REINSURANCE TRUST ACCOUNT

Section 15.1Reinsurance Trust Agreement.  Prior to the Restatement Date, Prime Re, as grantor, created (i) a trust account to support the Pecan-Funded Reserves (the “Pecan-Funded Reserves Trust Account”) and (ii) a trust account to support the Prime-Funded Reserves (the “Prime-Funded Reserves Trust Account,” and together with the Pecan-Funded Reserves Trust Account, the “Reinsurance Trust Accounts”) and has named the Ceding Company as sole beneficiary of each Reinsurance Trust Account.  On the Restatement Date, the Reinsurer assumed through novation Prime Re's position, as grantor, under the Pecan-Funded Reserves Trust Account and the Prime-Funded Reserves Trust Account.

Section 15.2Investment and Valuation of Trust Assets.  The assets held in the Reinsurance Trust Accounts (the “Trust Assets”) shall consist of Eligible Assets.

Section 15.3Adjustment of Trust Assets and Withdrawals.

(a)The amount of assets to be maintained in each of the Reinsurance Trust Accounts shall be adjusted following the end of each calendar quarter in accordance with the Reserve Report for the last calendar month of each calendar quarter provided to the Reinsurer pursuant to the terms of Section 8.1.  Such report shall set forth (i) the amount by which the Pecan-Funded Security Balance equals or exceeds the Pecan-Funded Reserves Trust Account Required Balance, (ii) the amount by which the Prime-Funded Security Balance equals or exceeds the Prime-Funded Reserves Trust Account Required Balance and (iii) the amount by which the Security Balance equals or exceeds the Required Balance, in each case as of the end of the immediately preceding calendar quarter.

(b)If the Pecan-Funded Security Balance exceeds 102% of the Pecan-Funded Reserves Trust Account Required Balance, in each case as of the end of the immediately preceding calendar quarter, then the Reinsurer shall have the right to seek approval (which shall not be unreasonably or arbitrarily withheld, conditioned or delayed) from the Ceding Company to withdraw the excess from the Pecan-Funded Reserves Trust Account; provided, however, that the Reinsurer may not withdraw any amounts from the Pecan-Funded Reserves Trust Account unless the Prime-Funded Reserves Trust Account contains at least 102% of the Prime-Funded Reserves Trust Required Balance.

(c)If the Prime-Funded Security Balance exceeds 102% of the Prime-Funded Reserves Trust Account Required Balance, in each case as of the end of the immediately preceding calendar quarter, then the Reinsurer shall have the right to seek approval (which shall not be unreasonably or arbitrarily withheld, conditioned or delayed) from the Ceding Company to withdraw the excess from the Prime-Funded Reserves Trust Account; provided, however, that the Reinsurer may not withdraw any amounts from the Prime-Funded Reserves Trust Account unless the Pecan-Funded Reserves Trust Account contains at least 102% of the Pecan-Funded Reserves Trust Required Balance.

(d)For so long as there is a separate Prime-Funded Reserves Trust Account and Pecan-Funded Reserves Trust Account, the Reinsurer shall, no later than twenty (20) Business Days following receipt of a Top-Up Notice delivered in accordance with Section 8.3(b) (i) regarding the Pecan-Funded Security Balance, deposit, or cause to be deposited, additional Trust Assets into the Pecan-Funded Reserves Trust Account so that the Pecan-Funded Security Balance, as of the date such additional Trust Assets are so deposited, is no less than the Pecan-Funded Reserves Trust Account Required Balance as of the end of the immediately preceding calendar quarter and (ii) regarding the Prime-Funded Security Balance, deposit, or cause to be deposited, additional Trust Assets into the Prime-Funded Reserves Trust Account so that the Prime-Funded Security Balance, as of the date such additional Trust Assets are so deposited, is no less than the Prime-Funded Reserves Trust Account Required Balance as of the end of the immediately preceding calendar quarter.  Without limiting or duplicating the Reinsurer's obligations pursuant to the immediately preceding sentence, irrespective of whether there is a separate Prime-Funded Reserves Trust Account and Pecan-Funded Reserves Trust Account, the Reinsurer shall, no later than twenty (20) Business Days following receipt of a Top-Up Notice delivered in accordance with Section 8.3(b) regarding the Security Balance, deposit, or cause to be deposited, additional Trust Assets into the Reinsurance Trust

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Accounts or, as applicable, any successor reinsurance trust account created pursuant and subject to the Reinsurance Trust Agreement, so that the Security Balance, as of the date such additional Trust Assets are so deposited, is no less than the Required Balance as of the end of the immediately preceding calendar quarter.

Section 15.4Negotiability of Trust Assets.  Prior to depositing Trust Assets with the Trustee, the Reinsurer or such other Person depositing Trust Assets shall execute all assignments or endorsements in blank, or transfer legal title to the Trustee of all shares, obligations or any other assets requiring assignments, in order that the Ceding Company, or the Trustee upon direction of the Ceding Company, may whenever necessary negotiate any such assets without consent or signature from the Reinsurer or any other entity.

Section 15.5Ceding Company's Withdrawals.  The Ceding Company (or any successor by operation of law of the Ceding Company, including, but not limited to, any liquidator, rehabilitator, receiver or conservator of the Ceding Company) may only withdraw Trust Assets for one or more of the following purposes, without diminution because of insolvency on the part of the Ceding Company or the Reinsurer:

(a)to pay, or reimburse the Ceding Company for payment of, the Reinsurer's Quota Share of premiums to be returned, but not yet recovered from the Reinsurer, to Policyholders because of cancellations of Reinsured Policies;

(b)to pay, or reimburse the Ceding Company for payment of, the Reinsurer's Quota Share of Covered Liabilities payable pursuant to the provisions of the Reinsured Policies, but not yet recovered from the Reinsurer;

(c)to pay to the Ceding Company any Commutation Payment due the Ceding Company but not yet paid by the Reinsurer;

(d)in the event that the Ceding Company has received notification from the Reinsurer or Trustee of termination of the Reinsurance Trust Accounts and where the Reinsurer's Quota Share of obligations under this Agreement remain unliquidated and undischarged ten (10) days prior to the scheduled termination date, the Ceding Company may withdraw all the assets in the Reinsurance Trust Accounts and deposit such amounts, in the name of the Ceding Company, in any United States bank or trust account, apart from its general assets, in trust for such uses and purposes specified in (a) and (b) above as may remain executory after such withdrawal and for any period after such termination date; or

(e)to pay to the Reinsurer or its designated payee amounts held in the Reinsurance Trust Accounts in excess of the amount necessary to secure the credit or reduction from liability for reinsurance taken by the  Ceding Company.

Any assets deposited into an account of the Ceding Company pursuant to clause (d) of this Section 15.5 or withdrawn by the Ceding Company pursuant to clause (e) of this Section 15.5 and any interest or other earnings thereon shall be held by the Ceding Company in trust and separate and apart from any assets of the Ceding Company, for the sole purpose of funding the payments and reimbursements described in clauses (a) through (e), inclusive, of this Section 15.5.

Section 15.6Return of Excess Withdrawals.  The Ceding Company shall return to the Reinsurer, within five (5) Business Days, assets withdrawn in excess of all amounts due under Sections 15.5(a), (b) and (e), or, in the case of Section 15.5(d) above, assets that are subsequently determined not to be due (the Fair Value of any such withdrawn assets at the time of withdrawal, the “Excess Withdrawal Amount”).  Any assets subsequently returned in the case of Section 15.5(d) shall include interest at the Prime Rate applied on a daily basis for the amounts returned.  Any such Excess Withdrawal Amount from a Reinsurance Trust Account and any interest accrued thereon in accordance with the preceding sentence shall be deemed to be an amount due to the Reinsurer and subject to Section 8.4.

Section 15.7Costs of Trust.  The cost of maintaining the Reinsurance Trust Accounts shall be borne by the Reinsurer.

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ARTICLE XVI

THIRD PARTY BENEFICIARY

Section 16.1Third Party Beneficiary.  Nothing in this Agreement or the Reinsurance Trust Agreement is intended to give any person, other than the parties to such agreements, their successors and permitted assigns, any legal or equitable right remedy or claim under or in respect of this Agreement or the Reinsurance Trust Agreement or any provision contained therein.

ARTICLE XVII

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 17.1Representations and Warranties of the Ceding Company.

(a)Organization, Standing and Authority of the Ceding Company.  The Ceding Company is a life insurance company duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, and has all requisite corporate power and authority to carry on the operations of its business as they are now being conducted.  The Ceding Company has obtained all authorizations and approvals required under Applicable Law to enter into and perform the obligations contemplated of the Ceding Company under this Agreement.

(b)Authorization.  The Ceding Company has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder.  The execution and delivery by the Ceding Company of this Agreement, and the performance by the Ceding Company of its obligations under this Agreement, have been duly authorized by all necessary corporate action and do not require any further authorization, action or consent of the Ceding Company.  This Agreement, when duly executed and delivered by the Ceding Company, subject to the due execution and delivery by the Reinsurer, will be a valid and binding obligation of the Ceding Company, enforceable against the Ceding Company in accordance with its terms, in each case subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting enforcement of creditors' rights and to general equity principles.

(c)No Conflict or Violation.  Except as set forth in Schedule B, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby in accordance with the respective terms and conditions hereof will not (a) violate any provision of the Articles of Incorporation or Bylaws of the Ceding Company, (b) violate, conflict with or result in the breach of any of the terms of, result in any modification of, give any counterparty the right to terminate, or constitute a default under, any contract or other agreement to which the Ceding Company is a party, or (c) violate any order, judgment, injunction, award or decree of any court, arbitrator or Governmental Authority against, or binding upon, or any agreement with, or condition imposed by, any Governmental Authority, foreign or domestic, binding upon the Ceding Company.

(d)Absence of Litigation.  There is no action, suit, proceeding or investigation pending or threatened that questions the legality of the transactions contemplated by this Agreement or that would prevent consummation of the transactions contemplated by this Agreement or the performance by the Ceding Company of its obligations hereunder.

(e)Milliman Information True and Complete.

(i)To the best of the Ceding Company's knowledge, all information and data supplied to ▇▇▇▇▇▇▇▇ Inc. (“Milliman”) identified on Exhibit V-A hereto (the “Milliman Information”) was true, accurate and complete in all material respects as of the date the document containing such Milliman Information was provided to Milliman by the Ceding Company; provided, however, the Parties acknowledge that no representation or warranty has been made to the Reinsurer or any of its Affiliates or Representatives with respect to the truth, accuracy and completeness of any assumptions, projections, or estimates either provided by the Ceding Company or underlying any of the studies prepared

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by the Ceding Company in connection with the Milliman Information except that the Ceding Company represents and warrants that such assumptions, projections or estimates were the ones actually utilized by the Ceding Company for the purposes stated in Exhibit V.  The Milliman Information was complied in a commercially reasonable manner given the intended purpose.

(ii)The financial data supplied to Milliman identified on Exhibit V-B hereto presents fairly, in all material respects, the financial condition and results of operations of the Ceding Company as of and for the periods specified therein in accordance with Massachusetts SAP, consistently applied.

(f)Coverage Information.  The Reinsured Policies information identified in Exhibit I is true, accurate and complete in all material respects.

(g)Regulatory Filings.  The Ceding Company has filed the appropriate regulatory filings to increase guaranteed premium provisions in Policies or coverages that may be issued upon the occurrence of a Conversion with each applicable state insurance regulator prior to the Effective Date and has received all required approvals or non-disapprovals from each such insurance regulator.

Section 17.2Covenants of the Ceding Company.

(a)Administration and Claims Practices.

(i)In the administration and claims practices relating to the Reinsured Policies (the “Administrative Practices”), the Ceding Company shall (A) use the skill and diligence commonly expected from qualified personnel performing such duties for U.S. life insurance companies; (B) act in accordance with the Ceding Company's internal company guidelines as in effect on January 1, 2016; (C) be in conformance with Applicable Law in all material respects; and (D) act in a manner consistent with its existing administrative and claims practices in effect on January 1, 2016 and in any case with no less skill, diligence and expertise as the Ceding Company applies to servicing its other business, including those claims practices in existence for Third Party Reinsurance (each, an “Existing Practice”); notwithstanding the foregoing, the Ceding Company shall not be in breach of this Section 17.2(a)(i) unless either (Y) the Reinsurer shall have notified the Ceding Company in writing of the Ceding Company's failure to perform its obligations under this Section 17.2(a)(i) (which written notice shall describe such failure with reasonable particularity) or (Z) an officer of the Ceding Company with direct responsibility for its administrative services, or any senior officer of the Ceding Company, has actual knowledge that the Ceding Company has failed to perform its obligations under this Section 17.2(a)(i), and in either case the Ceding Company shall have failed to cure such breach within thirty (30) days following receipt of such notice or such actual knowledge.

(ii)An Existing Practice may be reasonably modified from time to time, except that, to the extent the Ceding Company modifies an Existing Practice from time to time following January 1, 2016 (an Existing Practice, as modified from time to time, a “Then Current Practice”), the Ceding Company shall act in accordance and consistent with the Then Current Practice; provided, that, if a Then Current Practice would materially adversely affect the rights, remedies and position of the Reinsurer, the Ceding Company shall obtain the consent of the Reinsurer (which consent shall not be unreasonably withheld, conditioned or delayed) prior to applying the Then Current Practice to the Reinsured Policies.

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(b)Reinsured Policies.  In all instances as they relate to the Reinsured Policies:

(i)The Ceding Company shall not, and shall cause its Affiliates not to (A) change agent commission and compensation schedules, (B) adopt or implement any program that is expected to result in a material increase in lapses, exchanges, replacements or Conversions under the Reinsured Policies or (C) change coverage options or premiums (except as contemplated by Section 17.2(f) hereof), including coverage options for End of Term Conversions, in each case under (A), (B) and (C) without notifying the Reinsurer in advance of any such action and obtaining the Reinsurer's prior written consent (which shall not be unreasonably withheld, conditioned or delayed).

(ii)The Ceding Company and the Reinsurer shall reasonably cooperate on any proposals for pricing or coverage changes proposed by either Party, including making any rate and form filings or other regulatory filings that impact pricing or premiums under the Reinsured Policies; provided, however, the Ceding Company shall have final approval authority in its discretion over any proposal brought by the Reinsurer pursuant to this Section 17.2(b)(ii).

(iii)The Parties agree and acknowledge that the Ceding Company's relationship with the Reinsurer shall in all respects be governed by a duty of utmost good faith.  At all times during the term of this Agreement, the Ceding Company shall (i) administer, manage and oversee the Reinsured Policies and the Covered Liabilities, and (ii) perform all its obligations to the Reinsurer under this Agreement, in a manner consistent with its utmost good faith obligations.

(c)Third Party Reinsurance.

(i)The Ceding Company shall not, without the Reinsurer's prior approval (which approval shall not be unreasonably or arbitrarily withheld, conditioned or delayed), (A) terminate or materially modify any existing Third Party Reinsurance or (B) purchase new third party reinsurance for the Reinsured Policies.

(ii)The Ceding Company shall use commercially reasonable efforts to maintain its existing Third Party Reinsurance from and after the Effective Date, consistent with the existing practice of the Ceding Company in effect on the Effective Date.

(d)Reporting.  To the extent not prohibited by Applicable Law, the Ceding Company will provide all reports it is required to deliver under this Agreement (including, without limitation, each Monthly Report and Quarterly Report) not later than the last date on which such report is required to be so delivered, except that the Ceding Company shall not be in breach of this Section 17.2(d) unless either (i) the Reinsurer shall have notified the Ceding Company in writing of its failure to timely deliver such report or (ii) an officer of the Ceding Company with direct responsibility for the preparation and delivery of such report has actual knowledge that the report was not delivered when due, and in either case the Ceding Company shall have failed to deliver such information within thirty (30) days following receipt of such notice or actual knowledge.

(e)Books and Records.  The Ceding Company shall maintain and implement reasonable administrative and operating procedures with respect to records relating to the Reinsured Policies and shall keep and maintain all material documents, books, records and other information reasonably necessary for the maintenance of the Reinsured Policies, which documents, books, records and other information will be accurately maintained in all material respects throughout the term of this Agreement.

(f)Reinsurance Credit Notice.  Without limitation of the Ceding Company's rights under Article XI, and so long as no event described in Section 11.1 giving rise to a right of recapture hereunder by the Ceding Company has occurred and is continuing, following the delivery of a Reinsurance Credit Notice, the Ceding Company will, promptly upon any written request delivered by the Reinsurer within five (5) Business Days of delivery of such Reinsurance Credit Notice, discuss in good faith with the Reinsurer and consider whether to (i) make such modifications as may be needed to this Agreement and the Reinsurance Trust Agreement or (ii) enter into new agreements, in each case, as may be necessary to cure any denial of Statutory Financial Statement Credit by any insurance regulatory Governmental Authority.  For the avoidance of doubt, the foregoing shall not require the Ceding Company to take actions that would be adverse to the Ceding Company in its sole discretion.

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Section 17.3Representations and Warranties of the Reinsurer.

(a)Organization, Standing and Authority of the Reinsurer.  The Reinsurer is a special purpose financial insurance company duly organized, validly existing and in good standing under the laws of the State of Vermont and has all requisite corporate power and authority to carry on the operations of its business as they are proposed to be conducted.  The Reinsurer has obtained all authorizations and approvals required under Applicable Law to enter into and perform the obligations contemplated of the Reinsurer under this Agreement and the Reinsurer shall maintain throughout the term of this Agreement all licenses, permits or other permissions of any Governmental Authority that shall be required in order to perform the obligations of the Reinsurer hereunder.

(b)Authorization.  The Reinsurer has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder.  The execution and delivery by the Reinsurer of this Agreement, and the performance by the Reinsurer of its obligations under this Agreement, have been duly authorized by all necessary corporate action and do not require any further authorization, action or consent of the Reinsurer or its stockholder.  This Agreement, when duly executed and delivered by the Reinsurer, subject to the due execution and delivery by the Ceding Company, will be a valid and binding obligation of the Reinsurer, enforceable against the Reinsurer in accordance with its terms, in each case subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general application relating to or affecting enforcement of creditors' rights and to general equity principles.

(c)No Conflict or Violation.  The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not (a) violate any provision of the Articles of Incorporation, Bylaws or other charter or organizational document of the Reinsurer, or (b) violate any order, judgment, injunction, award or decree of any court, arbitrator or Governmental Authority against, or binding upon, or any agreement with, or condition imposed by, any Governmental Authority, foreign or domestic, binding upon the Reinsurer, except when any such violation would not have a material adverse effect on this Agreement or the consummation of the transactions contemplated hereby.

(d)Absence of Litigation.  There is no action, suit, proceeding or investigation pending or threatened that questions the legality of the transactions contemplated by this Agreement or that would prevent consummation of the transactions contemplated by this Agreement or the performance by the Reinsurer of its obligations hereunder.

Section 17.4Covenants of the Reinsurer.

(a)The Reinsurer shall comply with all covenants that are memorialized in Section IV.C. “Other Agreements” in the Reinsurer's plan of operation as filed with the Commissioner prior to the Restatement Date.  The Reinsurer shall not amend, modify or change, or request or petition for any amendment, modification or change to such covenants without the Ceding Company's prior written consent.

(b)The Reinsurer shall not redomesticate or change its domiciliary jurisdiction without the Ceding Company's prior written consent, such consent not to be unreasonably withheld, conditioned or delayed.

(c)The Reinsurer shall not, without the prior written consent of the Massachusetts Division of Insurance, amend this Agreement (other than Schedule C) or the Reinsurance Trust Agreement.

(d)The Reinsurer shall not engage in any business, other than the business provided by or relating to this Agreement, the Collateralized Stop Loss Reinsurance Agreement, the Excess of Loss Reinsurance Agreement and as permitted by Section 21.9.  Other than the reinsurance provided hereunder, the Reinsurer shall not issue or reinsure any insurance policies.

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ARTICLE XVIII

INDEMNIFICATION

Section 18.1Indemnification.

(a)The Ceding Company shall indemnify, defend and hold harmless the Reinsurer and its directors, officers, employees, agents, representatives, successors, permitted assigns and Affiliates from and against any and all losses, liabilities, claims, expenses (including reasonable attorneys' fees and expenses) and damages reasonably and actually incurred by the Reinsurer (collectively, “Indemnification Claims”) to the extent arising from:

(i)any breach or falsity of any representation, warranty or covenant of the Ceding Company; or

(ii)the breach of or failure to perform any of the duties, obligations, covenants or agreements of the Ceding Company contained in this Agreement.

(b)The Reinsurer agrees to indemnify and hold harmless the Ceding Company and its directors, officers, employees, agents, representatives, successors, permitted assigns and Affiliates from and against any and all Indemnification Claims to the extent arising from:

(i)any breach or falsity of any representation, warranty or covenant of the Reinsurer; or

(ii)the breach of or failure to perform any of the duties, obligations, covenants or agreements of the Reinsurer contained in this Agreement.

ARTICLE XIX

LICENSES; REGULATORY MATTERS

Section 19.1Licenses.

(a)At all times during the term of this Agreement, each of the Reinsurer and the Ceding Company, respectively agrees that it shall hold and maintain all licenses and authorities required under Applicable Laws to perform its respective obligations hereunder unless otherwise mutually agreed by the parties.

(b)At all times during the term of this Agreement, the Reinsurer shall hold and maintain all licenses and authorizations required under Applicable Law or otherwise take all action that may be necessary so that the Ceding Company shall receive Statutory Financial Statement Credit.

Section 19.2Regulatory Matters.

(a)If Ceding Company or Reinsurer receives notice of, or otherwise becomes aware of any inquiry, investigation, examination, audit or proceeding outside the ordinary course of business by Governmental Authorities, relating to the Reinsured Policies or the reinsurance provided hereunder, the Ceding Company or Reinsurer, as applicable, shall promptly notify the other party thereof.

(b)If Ceding Company or Reinsurer receives notice of, or otherwise becomes aware of any enforcement action by any Governmental Authority arising out of any inquiry, investigation, examination, audit or proceeding by such Governmental Authority, the Ceding Company or Reinsurer, as applicable, shall promptly notify the other party thereof, and the Parties shall cooperate to resolve such matter.

21

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ARTICLE XX

DURATION OF AGREEMENT; TERMINATION

Section 20.1Duration.  This Agreement shall automatically terminate if, at such time, there are no Covered Liabilities.

Section 20.2Termination.  This Agreement shall be terminated only by the mutual written consent of the Reinsurer and the Ceding Company, which writing shall state the effective date and relevant terms of termination or by the Reinsurer pursuant to Section 21.8.  For the avoidance of doubt, a Change of Control, sale or merger of the Reinsurer will not result in termination of this Agreement.

Section 20.3Survival.  Notwithstanding the other provisions of this Article XX, the terms and conditions of Articles I, IV, V, VIII, X, XI, XII, XIV, XV, XVI, XX and XXI shall remain in full force and effect after termination of this Agreement.

ARTICLE XXI

MISCELLANEOUS

Section 21.1Entire Agreement.  Without superseding anything contained in the Transaction Cooperation Agreement, among the Ceding Company, Prime Re, Swiss Re Life & Health America Inc. and Reinsurer, dated January 25, 2016, this Agreement represents the entire agreement between the Reinsurer and the Ceding Company concerning the business reinsured hereunder.  There are no understandings between the Reinsurer and the Ceding Company other than as expressed in this Agreement and the Reinsurance Trust Agreement.

Section 21.2Amendments.

(a)Any provision of this Agreement may be amended if, but only if, such amendment is in writing and is signed by each party to this Agreement; provided, that the Ceding Company shall not unreasonably withhold, condition or delay its consent to any amendment, change or modification to Schedule C proposed by the Reinsurer with at least forty-five (45) days prior written notice, subject to the provision by the Reinsurer of any information reasonably requested in connection with such proposed amendment, modification or change; it being acknowledged and agreed that it would be unreasonable for the Ceding Company to withhold, condition or delay its consent to any amendment, modification or change to Schedule C that is not adverse to the Ceding Company.  Any change or modification to this Agreement shall be null and void unless made by an amendment hereto signed by each party to this Agreement.

(b)No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

Section 21.3Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law or if determined by a court of competent jurisdiction to be unenforceable, and if the rights or obligations of the Ceding Company or the Reinsurer under this Agreement will not be materially and adversely affected thereby, such provision shall be fully severable, and this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom.

Section 21.4Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to the principles of conflicts of law thereof.

22

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Section 21.5Notices.  Any notice and other communication required or permitted hereunder shall be in writing and shall be delivered personally or sent by certified, registered or express mail, postage prepaid.  Any such notice shall be deemed given when so delivered personally or, if mailed, on the date shown on the receipt therefore, as follows:

if to the Ceding Company:

Primerica Life Insurance Company

▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇

▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇

Attention: General Counsel

with copies to (which shall not constitute notice to the Ceding Company for purposes of this Section 21.5):

DLA Piper LLP (US)
1251 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇

Attention: ▇▇▇▇▇ ▇. ▇▇▇▇

if to the Reinsurer:

Pecan Re Inc.

c/▇ ▇▇▇▇▇ Management Services, Inc.

▇.▇. ▇▇▇ ▇▇▇

100 Bank Street, Suite 610
Burlington, Vermont 05402-0530
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇

with copies to (which shall not constitute notice to the Reinsurer for purposes of this Section 21.5):

Swiss Re Life & Health America Inc.

▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇

Attention:▇▇▇▇ ▇▇▇▇▇

and

Swiss Re Life & Health America Inc.

▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇

▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇

Attention:▇▇▇▇ ▇▇▇▇▇▇▇

and

▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇

Either Party may change the names or addresses where notice is to be given by providing notice to the other Party of such change in accordance with this Section 21.5.

Section 21.6Consent to Jurisdiction.  Subject to the terms and conditions of Article XIV, the Reinsurer agrees that in the event of the failure of either Party to perform its obligations under the terms of this Agreement, the Party so failing to perform, at the request of the other Party, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States shall comply with all requirements necessary to give such court jurisdiction, and shall abide by the final decision of such court or of any appellate court in the event of an appeal.

23

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Section 21.7Service of Process.  The Reinsurer hereby designates ▇▇▇▇▇ Management Services, Inc., ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Ceding Company.  The Ceding Company hereby designates CT Corporation System, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the insurance commissioner in Reinsurer's state of domicile, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Reinsurer.

Section 21.8Failure to Pay. If the Ceding Company fails to pay any Net Premiums that are due within 20 Business Days of the Ceding Company receiving written notice from the Reinsurer that Net Premiums are past due, the Reinsurer will have the right to terminate this Agreement and the reinsurance provided hereunder upon at least five (5) Business Days written notice to the Ceding Company specifying the termination effective date; provided, however, that upon any such termination effective date unless on or prior to such termination effective date the Reinsurer pays such Net Premiums and any interest thereon in full, (i) in accordance with Section 11.5, the Reinsurer shall pay the Ceding Company a Commutation Payment, unless the amount thereof is negative, in which case the Ceding Company shall pay the absolute value thereof to the Reinsurer and (ii) the Ceding Company shall pay a Recapture Fee to the Reinsurer.  The Ceding Company will not cease paying any Net Premiums that are due or any other amounts in an effort to force or encourage the Reinsurer to exercise its termination rights under this Section 21.8.

Section 21.9Assignment and Retrocession.  This Agreement will inure to the benefit of and be binding upon the respective successors and permitted assigns of the Parties.  Neither Party may assign any of its duties or obligations hereunder without the prior written consent of the other Party or without the prior written consent of the regulatory states; provided, that the Reinsurer may assign its rights under Sections 15.3(c) and 15.6, including any enforcement rights against the Ceding Company under such sections, to Prime Re for so long as the Collateralized Stop Loss Reinsurance Agreement remains in effect.  Notwithstanding any other provision in this Agreement to the contrary, the Reinsurer shall have the right to retrocede all or a portion of the Reinsured Policies under this Agreement.

Section 21.10Captions.  The captions contained in this Agreement are for reference only and are not part of the Agreement.

Section 21.11Treatment of Confidential Information.  The Parties agree that, other than as contemplated by this Agreement and to the extent permitted or required to implement the transactions contemplated hereby, the Parties will keep confidential and will not use or disclose the other Party's Confidential Information or the terms and conditions of this Agreement, including, without limitation, the exhibits and schedules hereto, except as otherwise required by Applicable Law or any order or ruling of any state insurance regulatory authority, the Securities and Exchange Commission or any other Governmental Authority; provided, however, that the Reinsurer may disclose Confidential Information to its Representatives in connection with the exercise of its rights under Article XII; provided, further, that either party may disclose, with the other party's written consent, Confidential Information to any person other than its Representatives who agrees to (i) hold such Confidential Information in strict confidence as if such person were a party to this Agreement and (ii) use such Confidential Information solely for the limited purpose of evaluating a potential purchase, merger or Change of Control of such Party.  Without limiting the generality of the foregoing, neither the Reinsurer nor any Affiliates of the Reinsurer shall utilize any Confidential Information regarding Policyholders for the purpose of soliciting Policyholders for the sale of any insurance policies or other products or services.  The parties agree that any violation or threatened violation of this Section 21.11 may cause irreparable injury to a party and that, in addition to any other remedies that may be available, each party shall be entitled to seek injunctive relief against the threatened breach of the provisions of this Section 21.11, or a continuation of any such breach by the other party or any person provided with Confidential Information, specific performance and other such relief to redress such breach together with damages and reasonable counsel fees and expenses to enforce its rights hereunder.  For purposes of this Agreement, “Confidential Information” means all documents and information concerning one Party, any of its Affiliates, the Covered Liabilities or the Reinsured Policies, including any information relating to any person insured directly or indirectly under the Reinsured Policies, furnished to the other Party or such other Party's Affiliates or representatives in connection with this Agreement or the transactions contemplated hereby, except that Confidential Information shall not include information which:  (a) at the time of disclosure or thereafter is generally available to and known by the public other than by way of a wrongful disclosure by a Party or by any representative of a Party; (b) was available

24

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on a nonconfidential basis from a source other than the Parties or their representatives, provided that such source is not and was not bound by a confidentiality agreement with a Party; or (c) was independently developed without violating any obligations under this Agreement and without the use of any Confidential Information.  For the purposes of this Agreement, “Change of Control” means the acquisition of ten percent (10%) or more of the voting securities of a Party or any parent of such Party, or any other acquisition that is deemed to be a Change of Control by applicable insurance regulatory authorities of the state of domicile of such Party.

Section 21.12No Waiver; Preservation of Remedies.  No consent or waiver, express or implied, by any Party to or of any breach or default by any other Party in the performance by such other Party of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of obligations hereunder by such other Party hereunder.  Failure on the part of any Party to complain of any act or failure to act of any other Party or to declare any other Party in default, irrespective of how long such failure continues, shall not constitute a waiver by such first Party of any of its rights hereunder.

Section 21.13Calendar Days.  To the extent that any calendar day on which a deliverable pursuant to this Agreement is due is not a Business Day, such deliverable will be due the next Business Day.

Section 21.14Counterparts.  This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument, and either of the Parties may execute this Agreement by signing such counterpart.  This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto.

Section 21.15Incontestability.  In consideration of the mutual covenants and agreements contained herein, each party hereto does hereby agree that this Agreement, and each and every provision hereof, is and shall be enforceable by and between them according to its terms, and each party does hereby agree that it shall not contest the validity or enforceability hereof.

Section 21.16Interpretation.

(a)When a reference is made in this Agreement to a Section, such reference shall be to a Section to this Agreement unless otherwise indicated.  The Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes.  References to a person are also to its permitted successors and assigns.

(b)The parties have participated jointly in the negotiation and drafting of this Agreement; consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties thereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

Section 21.17Reasonableness.  Each of the parties will act reasonably and in good faith on all matters within the terms of this Agreement.

 

 

 

25

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

 

 

 

 

[Signature Page to the Amended and Restated 80% Coinsurance Agreement]

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Schedule A

Identification of Reserves

Exhibit 5 Policy Reserves

Exhibit 8 Claim Reserves

 

 

 

A-1

---

 

Schedule B

No Conflict or Violation Exceptions

None.

 

 

 

B-1

---

 

Schedule C

Stop Loss Assets Amount

 

 

 

 

C-1

---

 

Exhibit I

Identification of Reinsured Policies

 

I-1

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-2

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-3

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-4

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-5

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-6

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-7

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-8

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-9

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-10

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

I-11

---

 

Exhibit I - Identification of Reinsured Policies

 

 

 

 

I-12

---

 

Exhibit II

Third Party Reinsurance

 

 

II-1

---

 

EXHIBIT II - THIRD PARTY REINSURANCE

 

 

* CO = COINSURANCE

   XL = EXCESS LOSS YRT

   QS = QUOTA SHARE YRT

 

 

 

II-2

---

 

Exhibit III

Form of Monthly Report

Prime Re

Monthly Settlement Report

[See attached]

 

 

 

III-1

---

 

Swiss Re Reinsurance

Manual Expense Allowance

[•]

 

 

III-2

---

 

[•]

 

 

 

 

Swiss Re Reinsurance Top Up Notice

 

 

 

 

III-3

---

 

 

 

III-4

---

 

 

 

III-5

---

 

 

 

Total 26 files

 

 

 

 

III-6

---

 

 

 

 

 

Page 1

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Exhibit IV

Form of Monthly Account Balance Report

[See attached]

 

IV-1

---

 

 

[•]

 

 

IV-2

---

 

 

 

 

 

 

 

 

 

 

IV-3

---

 

Exhibit V-A

Milliman Information

 

 

V-A-1

---

 

Exhibit ▇-▇

▇▇▇▇▇▇▇▇ Information

 

 

V-B-1

---

 

Exhibit VI

Milliman Report

[See attached]

 

 

 

VI-1

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ACTUARIAL ANALYSIS OF

PRIMERICA LIFE INSURANCE COMPANY

AS OF JUNE 30, 2009

 

 

▇▇▇▇▇▇▇▇

 

 

 

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Dear Sirs:

This report provides actuarial values and projections as of June 30, 2009 for the individual life and annuity business of Primerica Life Insurance Company. This report reflects updates to our September 14, 2009 report for certain reinsurance treaty terms and other refinements to the projections.

Section I outlines the scope and qualifications associated with the analysis. Actuarial values and yearly statutory profits are summarized in Section II. Section III and the Appendices summarize the methodology, models and actuarial assumptions underlying the developed values.

This report is a statement of actuarial opinion under guidelines promulgated by the American Academy of Actuaries. The undersigned professionals are members of the American Academy of Actuaries and meet the Qualification Standards of the American Academy of Actuaries to render the opinion contained herein.

The professionals responsible for developing the actuarial values in this report are available to answer any questions regarding the assumptions and procedures underlying the values. Please contact us if any questions are raised.

Sincerely,

 

 

LDZ/YY:jk

 

Offices in Principal Cities Worldwid

 

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TABLE OF CONTENTS

 

 

▇▇▇▇▇▇▇▇

 

 

 

 

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SECTION I

Introduction and Qualifications

▇▇▇▇▇▇▇▇, Inc. (“Milliman”) was retained by Citigroup, Inc. (“Citi”) to perform certain actuarial analyses with respect to the life insurance business in Primerica Life Insurance Company (“Primerica” or “PLIC”). PLIC is wholly owned through various holding companies by Citi.

Specifically, our assignment has been to develop projected statutory earnings arising from the existing and new individual life business of Primerica and to calculate present values of these future earnings using discount rates of 11%, 13% and 15%.

The Primerica business consists primarily of level term traditional life business. Primerica markets through a network of about 100,000 independent agents who are primarily part-time, and who are exclusive to Primerica. The term business sold through this network is referred to generally as “term” in this report.

Milliman is frequently engaged to prepare such analyses of life insurance companies. The approach followed in this situation is consistent with methodology we have generally employed in previous engagements.

We have prepared this report with the understanding that it will be used by Citi and its advisors to analyze the potential value of Primerica. The report is intended to provide certain actuarial information and analyses as of June 30, 2009 that would assist a qualified actuary, technically competent in the area of actuarial appraisals, to develop an estimate of (1) the adjusted statutory book value of the companies as of June 30, 2009; (2) the projected amounts and present values of future statutory profits from insurance in force as of June 30, 2009; and (3) the projected amounts and present values of future statutory profits from insurance written after June 30, 2009.

In order to fully comprehend this report, any user of this report should be advised by an actuary with a substantial level of expertise in areas relevant to this analysis to appreciate the significance of the underlying assumptions and the impact of those assumptions on the illustrated results. This report must be read in its entirety to be understood.

This report may not be distributed, disclosed, copied or otherwise furnished to any party without our prior consent. Any distribution of this report must be in its entirety.

Nothing included in this report is to be used in any filings with any public body, such as but not limited to the Securities and Exchange Commission or State Insurance Departments, without prior written consent from Milliman. We understand this report may be shared with the Massachusetts Department of Insurance.

We have projected future statutory profits computed according to regulatory reporting criteria. The validity of these projections depends on how well future experience conforms to our assumptions. Our assumptions for future mortality, persistency, expenses, investment return and other actuarial factors are based on our evaluation of recent experience of Primerica, industry experience and anticipated future trends. The approach employed to develop the projection assumptions is described below.

- 1 -

Milliman

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Actual experience may differ from that assumed in the projections. To the extent actual experience is different from the assumptions underlying this Report, so will actual results differ from the projected results shown here. Sensitivity of results to changes in assumptions is provided as part of Section II, Summary of Results.

Rationale for Statutory Approach

Our development of the projected amounts and actuarial values in this report reflect statutory accounting practices. Two reasons why we believe it is appropriate to analyze a life company using the statutory approach are:

Relationship to Market Value

An actuarial appraisal value does not necessarily represent the value of a company's stock in the open market. Rather, it is derived from a projection of future earnings and therefore reflects the value of a company's earnings potential under a specific set of assumptions. Assignment of a value to any business enterprise is also a matter of informed judgment. Purchase or sales price is determined by the parties involved, based on their respective evaluations of all relevant factors, including:

Data Reliance

We have relied on information supplied by Primerica as well as on published financial information. We performed no audits or independent verification of the information furnished to us. To the extent that there are any material errors in the information provided, the results of our analysis will be affected as well. The principal materials relied upon include:

- 2 -

Milliman

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- 3 -

Milliman

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.SECTION II

Summary of Results

Summary of Actuarial Appraisal Values

Table I summarizes the present value of future statutory profits from business inforce on June 30, 2009, and the development of the reinsurance ceding commission for 80% of the inforce business. The business values are based upon thirty years of projected profits. Amounts reflect cost of capital based on 300% of NAIC RBC (Company Action Level).

 

 

PLIC is coinsuring an additional 10% of the inforce to PrimeRe under a treaty that incorporates an experience refund for the business, as described later in this Section. The effect of the experience refund is to transfer back to PLIC the profits of the business on an economic reserve basis, subject to a cap on the mortality. For this treaty, the ceding commission is assumed to equal the difference between statutory and economic reserves, as estimated below:

 

 

Tables II and III provide a summary of ten years of projected after-tax statutory profits for Primerica Life assuming ten years of projected new business, and after the reinsurance of the inforce business to

PrimeRe, a newly formed captive owned by Citi. No dividends are reflected out of PLIC. Tables IV and V provide a summary of the ten-year statutory income statements for PrimeRe.

Summaries of assumptions for each line of business are provided in Section III and in the Appendices. Detailed projections of annual statutory profits and present values of profit by line of business are provided in Appendix C.

 

 

 

- 4 -

Milliman

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Note: Interest on Capital, Surplus, & AVR is based on a net earnings rate of 5.70%.

- 5 -

Milliman

---

 

 

Note: Interest on Capital, Surplus, & AVR is based on a net earnings rate of 5.70%.

 

 

- 6 -

Milliman

---

 

 

 

Note: Interest on Capital, Surplus, & AVR is based on a net earnings rate of 5.70%.

- 7 -

Milliman

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Note: Interest on Capital, Surplus, & AVR is based on a net earnings rate of 5.70%.

 

 

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Discount Rates

The actuarial appraisal values were developed using discount rates of 11%, 13%, and 15%. Table I illustrates the importance of the discount rate in the determination of the value of profits from the business.

New Business

New business is projected to grow based on Primerica’s business plan. Life insurance production is stated in terms of annualized issued premium. No new production is assumed after ten years.

 

 

Of the U.S. life production, 7.5% is assumed to be in National Benefit Life (NBL), PLIC’s New York subsidiary.

Reserve Financing

Primerica Life reserves for all term business using segmented reserves, both before and after the introduction of Guideline XXX in 2000. The development of the ceding commission reflects reserve financing based on the following assumptions:

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The projections of the 20% of the inforce business remaining in PLIC, along with the new business, does not reflect any external reserve financing.

General Expense and Commissions

The unit expense assumptions were developed based on a combination of Primerica’s internal pricing allowables for acquisition costs and target allowables for maintenance. The difference between Primerica’s budgeted expenses and the unit cost allowable of $29 million was reflected as an unallocated expense and held constant for a period consistent with new business production.

Primerica does not perform a detailed allocation of shared expenses to the non-life product lines. Therefore, a significant portion of the unallocated expense represents shared expenses that support other business segments. In addition, the unallocated expense includes amounts that provide shared support for Primerica’s distribution system, for both life and non-life businesses.

PLIC has cost-sharing agreements and management agreements in place with its non-life affiliates. For purposes of a PLIC-only projection, excess experience is reduced by a net $12 million for these agreements.

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The projections reflect commission on a paid basis. Under the reinsurance treaty, PrimeRe will reimburse PLIC for commissions on an earned basis. In the first projection year, this results in an increase in the commission reimbursement by about $61.6 million for 80% of the business, which is reflected as an aggregate adjustment in Table I, and the ten-year projections. Subsequent years are not impacted.

Statutory Surplus Levels. Cost of Required Capital, and Risk Based Capital

The approach used to project yearly profits underlying the present values reflects an assumption that all future earnings from inforce and new business are paid out as reported. Included in this calculation is provision for the minimum level of statutory net worth required to continue favorable regulatory and rating agency treatment. Tables II and III provide a projection of capital, surplus, and AVR levels assuming all statutory earnings are paid out in excess of the funds required to maintain a 300% NAIC RBC (Risk Based Capital - Company Action Level) ratio in Primerica.

The cost of retaining capital to support the ongoing insurance operations will depend on a) the level of capital believed necessary for the risks inherent in the insurance operations of Primerica and to achieve desired ratings from various rating agencies; and b) the differential between the rate of return realized on retained capital and a buyer’s desired rate of return for an acquisition. The cost of capital based on maintaining 300% NAIC RBC is provided for in Table I. The detailed factors used to develop projected RBC are summarized in Appendix A.

Federal Income Taxes

The actuarial appraisal values summarized in Table I have been adjusted for the effect of Federal income taxes, assuming a 35% tax rate. In evaluating the potential effect of taxes on value, one should consider:

For purposes of this analysis, we have projected taxes as 35% of statutory income, adjusted as described below.

The 80% reinsurance transaction will be under an indemnity coinsurance arrangement. Under an indemnity coinsurance transaction, a reinsurer would receive a deduction of the tax-basis ceding commission. The Tax Benefit on Reinsurance in Table I is developed as follows:

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Reinsurance Between PLIC and Prime Re

The ten-year projections for PLIC and Prime Re reflect the following anticipated reinsurance terms:

 

 

The Finance charge is assumed to be 3% of excess reserves (statutory reserve — economic reserve).

In addition, the following terms are reflected for EOT conversions and renewals:

Sensitivity Analysis

We have developed values and projections under the following changes in assumptions:

Results are summarized below.

 

 

The ten-year projections are included on the following pages.

 

 

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